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Half of IFAs who sold Arch cru have ceased trading

Over half of the adviser firms that recommended significant volumes of Arch cru funds are no longer trading, according to estimates by a law firm involved in representing advisers.

This would see a large number of claims fall on the Financial Services Compensation Scheme if investors complain about their IFA as a result of the FSA’s £54m compensation package. The package is designed to offer investors 70 per cent of net asset value of their funds when the £400m range was suspended in March 2009 when combined with distributions already made and remaining assets. Investors can pursue IFAs for additional losses.

Regulatory Legal, which is planning to launch a judicial review of the FSA’s compensation package, expects significant claims will fall on the FSCS if the deal goes through. Partner Gareth Fatchett says: “We estimate just under 50 per cent of the 140-odd firms selling 90 per cent of Arch cru are trading today. On that basis, significant claims will be made to the FSCS.”

An FSCS spokesman says: “The FSCS has a duty to pay claims where they fall due and recognises the impact they can have on the industry due to the levy charge.”

Philip J Milton & Company managing director Philip Milton says: “It would be unfair of the FSCS to levy firms that did not sell Arch cru for compensation.”


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. John Rawicz-Szczerbo 27th October 2011 at 8:51 am

    Remember Keydata anyone?

  2. Yet again the majority, that could see through an investment, are made to pay for the minority who did not carry out proper due dilegence and were only interested in presenting the latest idea to a client to earn a commission!

    No doubt many of the advisers who were in a business that is no longer trading will reappear somewhere else to start promoting the next big idea when it appears.

    Surely the FSA should be looking into this for individual advisers. It might save the majority of us from a future levy!

  3. Not quite as black and white as that,we did sell Arch Cru, in small amounts Max £20000 as part of diversified portfolios, did not take anywhere near max commission in fact on some no commission,we are still in business and feel that this is a complete stich up by Capita and the FSA

  4. Anonymous 9:03 am

    Why would the FSA go to that bother when its much easier to penalise those of us that never went anywhere near an Arch cru fund? In this never ending claim chasing society this is just going to get worse and worse and the few that caused this problem are long gone. The rest of us pick up the bill. How long this can be sustainable is anyone’s guess but the regulator isn’t going to change this anytime soon.

  5. David Cowell, Myddleton Croft 27th October 2011 at 9:55 am

    Yet another prime example of the total lack of requirement for a regulator such as the FSA, FCA, PIA, FIMBRA, etc, etc.
    All that is needed is natural selection by PI insurers and a strong compensation fund supported by both product and industry levies. Probably one third of the cost; no political posturing, and protected punters. Simples!
    When I’m king…….

  6. David @ 9.55am

    I agree mate, but are you sure your really name isn’t Simon with that ego of yours!!! 🙂

  7. Any provider can still go bust …Lehmans for example, there are a few banks and Insurance companies that have the potential to go wrong in a big way also.
    The bottom line is, regardless if all your advice is fine, without complaints or compliance issues, make sure you have good PI, trade as a limited company because if a big provider goes bust due to criminal/fraudulent activities or just missmanagement…………..ALL the remaning IFA’s pay the bill

  8. I think David has hit the nail on the head.

    PI insurers understand risk and would, no doubt, take a good look at the experience and qualifications of an IFA , the way the business is run, past complaints and claims,the internal compliance capabilities etc. and then make a judgement about what level of activities could be covered. If the PI insurer won’t cover some activities, then the IFA cannot deal in them.

    This would give competitive advantage to the good firms and the others have to improve or fall by the wayside.

  9. We had a client who claimed against their IFA and the case was fast tracked but still dragged on for 23 months.

    During the process we informed the FSA & FOS that the IFA was setting up a new company and becoming an appointed rep and the firm we were claiming aainst would go into liquidation when they were no longer trading.

    Did the FSA do anything – NO.

    Were we correct YES.

    Thankfully the company had settled their part of this liability before they went under and the PI insurers settled direct with client for balance.

    However, which company do you think were representing the IFA and liquidator ………………..
    Yes you have probabley guessed Regulatory Legal!

  10. Joe Egerton - Justice in Financial Services 27th October 2011 at 11:20 am

    There is indeed a major problem for the industry if the challenge to the Payment Scheme by Coull Money backed by Justice in Financial Services fails. The hit on the FSCS could well reach £100m. Regulatory Legal is asking investors to sign up with it to make claims on FSCS, charging them 10 per cent of all they recover. For advice from Justice in Financial Services contact us through our website

  11. All of what an Adviser can recommend can haunt you in the years ahead.

    Sticking to conventional annuities and life cover now. You are either alive or dead – no dubiety on that.

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